The Kansas City Southern backs bounced back from a $ 34 billion bid in Canada’s national bid

Kansas City Southern has backed a $ 34 billion bid from Canadian National to rival Pacific Pacific as it heats up a bidding war for the train operator.

CN has offered KCS shareholders $ 200 in cash and 1,129 shares to pay up $ 200 in cash and 1,059 shares of CN common stock.

The overall value of the deal remains unchanged: KCS shareholders will be paid $ 325 per share, but the higher component of CN stocks reflects the decline in the share price of the Montreal Railroad Group.

KCS, which already approved the acquisition CP $ 29 billion including debt, he would have to pay a $ 700 million fee to break the deal.

Both mergers would create the first railroad in Canada, the US and Mexico. The North American economy is expected to see an increase in traffic as it recovers from the coronavirus pandemic.

“After consultation with the company’s external legal and financial advisors, KCS’s board of directors has determined that CN’s revised proposal is a“ Higher Business Proposal ”as defined in KCS’s merger agreement with Pacific Pacific Railway,” KCS said in a statement.

CP has five days to return with a great offer, which should exceed at least the 20 percent premium offered by CN, in what has become a tight-knit buying struggle.

CP said it was confident that its offer would eventually prevail, claiming that the combination with CN would pose major regulatory challenges.

“It is not surprising that CN has raised its bid, and only emphasizes its acceptance of the significant regulatory risks / challenges associated with bidding against CN,” the CP said in a statement.

“The Surface Transport Committee has already approved the use of voting confidence by the CP for the pro-competitive combination with KCS,” he added.

The race to buy the smallest of the seven Level 1 railroad groups that serve the North American freight market is the most daring attempt to consolidate the industry since CSX and Norfolk Southern bought Conrail in 1999 and split it between the two.

The agreement was reached a year later US-Mexico-Canada trade agreement It replaced the North American Free Trade Agreement, raising hopes for a rise in cross-border business activity.

CN has been fascinating since she made the play at KCS, pulling out ads and creating a website called Connected Continent to attract support for the offering.

“We are the best offer, the best partner, the best rail and the best solution for KCS, and we are pleased that the KCS board of directors has recognized the superiority of our proposal,” said Robert Pace, chairman of the CN committee on Thursday.